Tax is computed on the salary which is received during the year. Sometimes the employee receives the salary in arrears or advance. When the salary is received from the employer in arrears, the tax rate could be higher and you might be required to pay taxes at a higher rate. For avoiding such condition, the Income Tax laws provide for relief to the salaried employees with the help of the provisions contained in section 89 (1) of the Income Tax Act, 1961. The Process to claim Income tax relief under section 89(1) is shared below
For saving yourself from the burden of any additional tax in respect to delayed income, the tax laws offer this relief to the tax payers. In other words, a taxpayer is saved from the burden of additional tax because of delayed receipt of dues.
You need to submit Form 10E is for claiming tax relief for salary in arrears under the section 89(1) of the Income Tax Act, 1961 from FY 2014-15.
Process for claiming Income tax relief under section 89(1) for salary arrears
In case you have received part of your salary in advance or in arrears, or family pension in arrears, Income tax relief under section 89(1) is available to you.
Step 1 Calculate the tax which is payable on your total income after including the additional salary which you have received during the year. You can find this figure in your Form 16.
Step 2 Now, calculate tax which payable on your total income after excluding the additional salary which you have received during the year.
You could get this sum of the additional salary from the arrears document provided by the employer.
Now you need to subtract the arrears from your total salary which is received (including arrears), which could be retrieved from Form 16
After finding the amount after arrear, you are required to compute the tax for the same.
Step 3 Now, calculate the difference between Steps 1 and 2
Step 4 Now, calculate the tax which is payable on total income for the year to which such arrears relate, excluding the arrears
Step 5 Calculate the tax which is payable on total income for the year to which such arrears relate, including the arrears
Step 6 Calculate the difference between Steps 4 and 5
Step 7 The additional amount at Step 3 over Step 6 is the tax relief which would be allowed.
Note that if the amount arrived at Step 6 is higher than the amount so arrived at Step 3 no relief would be permitted.
Steps for filling Form 10E for claiming relief u/s 89(1)
If you are claiming the relief under section 89 (1) of the Income Tax Act, 1961 but do not furnish the form 10E online, you will receive a notice from the income tax department disallowing the relief under section the said section.
For avoiding this issue, you are required to fill a simple form available on the income tax e-filling portal.
Just follow these steps as mentioned below for filling form 89 (1) online:
- Login to your account at income tax e-filling portal with using your ID and password along with your PAN number or date of birth.
Once you are logged into your account, press the tab ‘e-File’ and choose ‘Prepare & Submit Online Form (Other than ITR)
- Once you select the same, a dialogue box would appear as shown in the screenshot below. You need to select Form 10E from the drop down.
- Once you select the AY, a dialogue box would appear as shown below in the screenshot together with the instructions about filing the Form 10E and you need to keep clicking on blue tabs by providing all the relevant details.
Notice for non-filing of the Form 10E
Now, according to the Income Tax Department, it is mandatory for filing Form 10E in case you are looking to claim the relief under section 89(1) of the Income Tax Act, 1961.
Taxpayers who have already claimed the relief under section 89(1) but are yet to file Form 10E have received the notice from the income tax department disallowing the relief under section 89(1) of the Income Tax Act, 1961